When starting a data storage service in Vietnam, it is crucial to understand the legal requirements involved. From equipment specifications to compliance with Vietnamese laws, ensuring your business meets all the data storage service legal requirements in Vietnam is key to operating efficiently and securely. This guide covers everything you need to know.
Introduction
Vietnam’s hosting industry has experienced significant growth, driven by the country’s rapid digital transformation and increasing internet penetration. For foreign investors, this presents lucrative opportunities, but it also comes with a unique set of legal challenges. Understanding and complying with Vietnam’s regulations is crucial for the success and longevity of any foreign-owned hosting company in the country.
Licensing and Registration
The first step for any foreign-owned hosting company looking to operate in Vietnam is obtaining the necessary licenses and completing the registration process. This typically involves:
Obtaining an Investment Registration Certificate (IRC) from the Department of Planning and Investment, in accordance with Article 38 of the Investment Law 2020 (Law No. 61/2020/QH14), which stipulates the procedures and requirements for obtaining an Investment Registration Certificate.
Securing a Business Registration Certificate (ERC) as per Articles 33 and 34 of Decree 01/2021/ND-CP, which provides guidelines for implementing the Enterprise Law 2020 (Decree No. 01/2021/ND-CP), and Article 26 of the Enterprise Law 2020 (Law No. 59/2020/QH14) detailing the conditions for granting a Business Registration Certificate.
Acquiring specific licenses related to hosting services from the Ministry of Information and Communications (MIC), in accordance with:
Decree 72/2013/ND-CP on the management, provision, and use of Internet services and online information, issued on July 15, 2013 (Decree No. 72/2013/ND-CP);
Decree 27/2018/ND-CP amending and supplementing Decree 72/2013/ND-CP, issued on July 15, 2013;
Circular 09/2014/TT-BTTTT, which provides detailed regulations on the management, provision, and use of information on electronic information pages and general electronic information pages (Circular No. 09/2014/TT-BTTTT).
The registration process can be complex and time-consuming, often requiring the assistance of local legal experts familiar with Vietnam’s business landscape.
Data Center Regulations
Foreign-owned hosting companies must adhere to strict regulations regarding data centers in Vietnam. Key considerations include:
- Location restrictions: Data centers must be located in approved areas, often within industrial zones or high-tech parks
- Infrastructure requirements: Companies must meet specific standards for power supply, cooling systems, and network connectivity
- Data localization laws: Certain types of data must be stored within Vietnam’s borders, as mandated by the Cybersecurity Law
The legal basis for data center regulations includes the Telecommunications Law, which outlines the conditions for establishing and operating data centers; the Storage Law, which specifies requirements for infrastructure and technology for companies providing storage services; and Article 26 of the Cybersecurity Law, which mandates the responsibility for storing data within Vietnam’s territory and protecting personal data information.
Cybersecurity Compliance
Article 26 of Vietnam’s Cybersecurity Law, which came into effect in 2019, has significant implications for hosting companies. Key requirements include:
- Mandatory data localization for specific types of information
- Cooperation with authorities in cases of cybersecurity incidents
- Implementation of robust data protection and privacy measures
Foreign-owned hosting companies must stay informed about ongoing developments in cybersecurity regulations to ensure continuous compliance.
Foreign Ownership Restrictions
While Vietnam has become increasingly open to foreign investment, some restrictions on foreign ownership in the hosting sector remain. Currently, foreign investors can own up to 100% of a hosting company in Vietnam, based on the Telecommunications Law 2023, but this is subject to change. It’s crucial to stay updated on any shifts in foreign ownership policies that may affect the hosting industry.
Tax Obligations
Foreign-owned hosting companies in Vietnam are subject to various taxes, including:
- Corporate Income Tax (CIT): Currently, a rate of 20% is applied to taxable profits as stipulated in Clause 6, Article 1 of the Amendments and Supplements to the Corporate Income Tax Law.
- Value-Added Tax (VAT): Set at a rate of 10% for hosting services as per Article 11 of Circular 219/2013/TT-BTC.
- Foreign Contractor Tax (FCT): Applicable to foreign organizations providing goods and services to parties in Vietnam, according to the provisions of Circular 103/2014/TT-BTC.
It’s worth noting that Vietnam offers tax incentives for tech companies, including potential tax holidays or reduced rates for companies operating in certain high-tech sectors or economically disadvantaged areas.
Labor Laws and Staffing
When it comes to staffing, foreign-owned hosting companies must navigate Vietnam’s labor laws, which include:
- Regulations on hiring local labor, including mandatory social insurance contributions, are outlined in Article 168 of the Labor Code 2019.
- Requirements for work permits for foreign employees, including restrictions on the number of foreign workers, are specified in Article 151 of the Labor Code 2019 and Decree No. 152/2020/ND-CP.
- Compliance with the Labor Code 2019 regulations regarding working hours, rest periods, and employee rights is mandatory.
Intellectual Property Protection
Protecting intellectual property (IP) is crucial for hosting companies. Vietnam has made significant strides in improving its IP protection framework, but challenges remain. Foreign-owned hosting companies should:
- Register trademarks and copyrights with the relevant Vietnamese authorities
- Implement robust internal policies to protect proprietary technologies and trade secrets
- Be prepared to enforce IP rights through legal channels if necessary
Compliance Challenges and Solutions
Foreign-owned hosting companies often face several compliance challenges in Vietnam, including:
- Rapidly evolving regulations that can be difficult to track and interpret
- Language barriers in understanding and implementing legal requirements
- Bureaucratic processes that can slow down business operations
To overcome these challenges, companies should consider:
- Partnering with local legal experts who specialize in tech and foreign investment laws
- Implementing robust compliance management systems to stay ahead of regulatory changes
- Building strong relationships with relevant government agencies to facilitate smoother operations
Future Outlook
The legal landscape for foreign-owned hosting companies in Vietnam is likely to continue evolving. Potential changes on the horizon include:
- Further refinement of cybersecurity and data protection laws
- Possible easing of foreign ownership restrictions in certain tech subsectors
- Increased government support for digital infrastructure development
Foreign investors should remain vigilant and adaptable to these potential changes to capitalize on the growing opportunities in Vietnam’s hosting industry.
Conclusion
While the legal requirements for foreign-owned hosting companies in Vietnam can be complex, the potential rewards of entering this dynamic market are significant. By thoroughly understanding and complying with the regulatory framework, foreign investors can position themselves for success in Vietnam’s rapidly growing digital economy. As the legal landscape continues to evolve, staying informed and adaptable will be key to long-term success in this exciting market.
For foreign-owned hosting companies looking to enter or expand in Vietnam, it’s crucial to work closely with local legal experts, maintain open communication with relevant government agencies, and stay abreast of regulatory changes. With the right approach to compliance and a commitment to navigating the legal landscape, foreign investors can tap into the immense potential of Vietnam’s hosting industry while contributing to the country’s digital transformation.
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